VIKViking

Nine pass-or-fail tests of profitability, balance-sheet strength and efficiency, against the year before.

• Net income positivepassed
• Return on assets positivepassed
• Operating cash flow positivepassed
• Cash flow above net incomepassed
• Long-term debt fallingfailed
• Current ratio risingpassed
• No new shares issuedfailed
• Gross margin risingpassed
• Asset turnover risingpassed

A weighted sum of five balance-sheet ratios that has historically separated companies heading for bankruptcy from the rest.

Working capital / total assets

-0.198

Retained earnings / total assets

-0.523

EBIT / total assets

0.106

Market value of equity / total liabilities

1.42

Revenue / total assets

0.527

Eight ratios that tend to move when reported earnings are being flattered. Above −1.78 the model flags the company.

Days' sales in receivables

0.78

Gross margin

0.96

Asset quality

0.88

Sales growth

1.22

Depreciation

1.03

SG&A expense

0.96

Total accruals / assets

-0.115

Leverage

0.89

A model of the probability of default within two years, from size, leverage, liquidity and profitability.

O-Score

0.89

Total liabilities / total assets

0.908

Working capital / total assets

-0.099

Current liabilities / current assets

1.270

Net income / total assets

0.094

How much of reported profit arrived as cash. The Sloan ratio is the accrued, non-cash share of earnings against assets.

Cash flow to net income

13.6×

Cash-flow return on invested capital

25.1%

Dividend payout ratio

12.4%

Free cash flow / dividends

61.5×

Dividend safety

safe